ASIC FUNDAMENTAL ANALYSIS - Amazon S3 · - you will understand valuation (find good deals and buy smart) - you will analyze current stocks and practice - you will you use your computer

BASIC FUNDAMENTAL ANALYSIS

- YOU WILL UNDERSTAND VALUATION (FIND GOOD DEALS AND BUY SMART)

- YOU WILL ANALYZE CURRENT STOCKS AND PRACTICE

- YOU WILL YOU USE YOUR COMPUTER TO SEARCH FOR STRONG COMPANIES

- YOU WILL LEARN FUNDAMENTAL VOCABULARY ESSENTIALS

-YOU WILL DISCOVER HOW FUNDAMENTALS RELATE TO DEBT, CURRENCY, AND INFLATION

- YOU WILL FIND OUT HOW TO SET FUNDAMENTAL ANALYSIS CRITERIA

FUNDAMENTAL ANALYSIS ONLINE TRAINING

IMPORTANT DISCLAIMER INFORMATIONTANNER TRAINING LLC IS PROVIDING THIS TRAINING AND ANY RELATED MATERIALS (INCLUDING NEWSLETTERS, BLOG POSTS AND OTHER COMMUNICATIONS) FOR EDUCATIONAL PURPOSES ONLY. WE ARE NOT PROVIDING LEGAL, ACCOUNTING, OR FINANCIAL ADVISORY SERVICES, AND THIS IS NOT A SOLICITATION OR RECOMMENDATION TO BUY OR SELL ANY STOCKS, OPTIONS, OR OTHER FINANCIAL INSTRUMENTS OR INVESTMENTS. EXAMPLES THAT ADDRESS SPECIFIC ASSETS, STOCKS, OPTIONS OR TRANSACTIONS ARE FOR ILLUSTRATIVE PURPOSES ONLY AND MAY NOT REPRESENT SPECIFIC TRADES OR TRANSACTIONS THAT WE HAVE CONDUCTED. IN FACT, WE MAY USE EXAMPLES THAT ARE DIFFERENT OR THE OPPOSITE OF TRANSACTIONS WE HAVE CONDUCTED OR POSITIONS WE HOLD. THIS TRAINING IS ALSO NOT INTENDED AS A SOLICITATION FOR ANY FUTURE RELATIONSHIP, BUSINESS OR OTHERWISE, BETWEEN THE STUDENTS OR PARTICIPANTS AND THE TRAINER. NO EXPRESS OR IMPLIED WARRANTIES ARE BEING MADE WITH RESPECT TO THESE SERVICES AND PRODUCTS.

ALL INVESTING AND TRADING IN THE SECURITIES MARKETS INVOLVES RISK. ANY DECISION TO PLACE TRADES IN THE FINANCIAL MARKETS, INCLUDING TRADING IN STOCK OR OPTIONS, IS A PERSONAL DECISION THAT SHOULD ONLY BE MADE AFTER THOROUGH RESEARCH, INCLUDING A PERSONAL RISK AND FINANCIAL ASSESSMENT, AND THE ENGAGEMENT OF PROFESSIONAL ASSISTANCE TO THE EXTENT YOU BELIEVE NECESSARY.

IGNORANCE COMPETENCEAWARENESS PROFICIENCY

PHASE 1 PHASE 2PHASE 0 PHASE 3

401 K MUTUAL FUNDS

HANDS OFF

LITTLE OR NO FINANCIAL EDUCATION

ADVANCED CLASSESSELECT YOUR STYLE

BASIC CLASSESMENTOR

MARKET LABS

SPECIFIC RULES DETAILS

SELECT YOUR STYLE

STRATEGIESVOCABULARY

CONTEXT CLASSES

EXPERIENCEPRACTICE INCOME!

MARKET LABS

ANDY’S EDUCATION CONTINUUMTM

FUNDAMENTALANALYSIS

TECHNICALANALYSIS

CASH FLOW RISK MANAGEMENT

STRENGTH OF AN ENTITY STRENGTH OF A MARKET EARN UP, DOWN, SIDEWAYS EXPECT THE UNEXPECTED

FOUR PILLARS OF INVESTING

FINANCIAL STATEMENT

CASH FLOW

INCOME STATEMENT

EQUITY

BALANCE SHEET

THE HEART OF FUNDAMENTAL ANALYSIS IS THE FINANCIAL STATEMENT.

INCOME

EXPENSES

ASSETS LIABILITIES

THREE BASIC FINANCIAL STATEMENTS:

PERSONAL CORPORATE SOVEREIGN

WHAT IS LIKELY?THE VELOCITY OF A BODY REMAINS CONSTANT

UNLESS THE BODY IS ACTED UPON BY AN EXTERNAL FORCE.

WHERE ARE THINGS HEADED NOW?

EXTERNAL FORCE = POLICY

1. TAXES

2. SPENDING

1. INTEREST RATE

2. BUY TREASURIES

IMPACTS THE MONEY SUPPLY AND THE GDP

FISCAL POLICY

CONGRESS

MONETARY POLICY

FEDERAL RESERVE

IMPACTS INCOME, EXPENSES THE DEFICIT AND THE DEBT

SOVEREIGN FINANCIAL STATEMENT: UNITED STATES

$100+ TRILLION

SOCIAL SECURITY, MEDICAREDEBT SERVICE, DEFENSE

(RECESSION)

$14 TRILLION

ON BALANCE SHEET PROMISE

I TAXES

OFF BALANCE SHEET PROMISE

$1.6 TRILLIONDEFICIT

INSOLVENCY

DEFAULT

BANKRUPTCY

WHERE ARE THINGS HEADED NOW?THE BANKRUPTCY PATTERN

OPERATES AT A DEFICIT AND MUST USE

RESERVES OR DEBT PROGRAM

FAILS TO PAY OBLIGATIONS DEATH OR

RESTRUCTURING OF THE ENTITY

SOVEREIGN FINANCIAL STATEMENT: UNITED STATES

$100+ TRILLION

SOCIAL SECURITY, MEDICAREDEBT SERVICE, DEFENSE

(RECESSION)

$14 TRILLION

ON BALANCE SHEET PROMISE

I TAXES

OFF BALANCE SHEET PROMISE

QUANTITATIVE EASING

$1.6 TRILLIONDEFICIT

THE UNITED STATES CAN PAY ANY DEBT IT HAS

BECAUSE WE CAN ALWAYS PRINT MONEY TO

DO THAT

- ALAN GREENSPAN

PRINTING MONEY

NOTES AND CERTIFICATES REPRESENT VALUE

STOCKCERTIFICATEONE SHARE

CERTIFIES THAT YOU OWN A CAR IN THE VALET GARAGE

CERTIFIES THAT YOU OWN SILVER IN THE TREASURY

CERTIFIES THAT YOU OWN A SHARE OF THE COMPANY

WHAT WOULD HAPPEN IF I PRINTED MORE TICKETS?

CERTIFIES THAT YOU OWN A CAR IN THE VALET GARAGE

NOTES AND CERTIFICATES REPRESENT VALUE

WHAT WOULD HAPPEN IF I PRINTED MORE CERTIFICATES?

WHAT WOULD HAPPEN IF I PRINTED MORE CURRENCY?

IT WOULD BE FRAUD - BECAUSE IT WOULD NOT

PRODUCE MORE SILVER.....

FIAT CURRENCY

BACKED BY THE FULL FAITH A CREDIT OF THE

UNITED STATES

WHAT WOULD HAPPEN IF I PRINTED MORE CURRENCY?

IT WOULD NOT BE FRAUD - BECAUSE IT JUST MAKING

ANOTHER PROMISE

EARNINGS: $10,000

$10 EARNINGS:

/ SHARE

STOCK SHARE

FULL FAITH AND CREDIT

PRINTING MORE STOCK CERTIFICATES

INFLATION - REDUCING THE VALUE OF THE DOLLAR

$10/GALLON$1/GALLON $5/GALLON

Remarks by Governor Ben S. BernankeBefore the National Economists Club, Washington, D.C.November 21, 2002

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services.

IN THIS CASE PRODUCTS DO NOT GAIN VALUE, THE DOLLAR LOSES

TREASURY NEEDS MONEY TO COVER THE DEFICIT, SO IT

BORROWS MONEY BY SELLING TREASURY BONDS.

HOW DOES THE FED CREATE CURRENCY?

“CODE” FOR PRINTING MONEY:“EXPAND THE BALANCE SHEET”

“MONETIZING THE DEBT”“QUANTITATIVE EASING”

THE MARKET GETS MORE CURRENCY

HOW DOES THE FED CREATE CURRENCY?

LIABILITIESASSETS

NOW THE GOVERNMENT CAN PAY ITS BILLS FOR

A SHORT TIME...

NOW THERE IS AN INCREASE OF US CURRENCY IN THE WORLD...

...BUT THERE IS NOT AN INCREASE IN THE AMOUNT OF GOODS

THUS WHILE THE FED HAS INCREASED THE CURRENCY SUPPLY, THE DEMAND FOR GOODS REMAINS THE SAME, SO THE CURRENCY’S VALUE DECREASES.

SUPPLY AND DEMAND

SINCE A DOLLAR IS NOW NOT AS VALUABLE, WE HAVE TO EXCHANGE MORE DOLLARS FOR THE GOODS.

NOT WORTH A CONTINENTAL

LESSONS FROM HISTORY

SOAP: $50SUIT: $2700

400,000,000,000,000,000,000,000,000,000

(FOUR HUNDRED OCTILLION) PENG! BECAME 1 FORINT.

IN 1980, ZIMBABWE ISSUED A NEW DOLLAR CURRENCY IN WHICH 1 ZWD WAS

WORTH $1.47 UNITED STATES.

IN FEBRUARY 2009 THE ZIMBABWE DOLLAR WAS RE-DENOMINATED FOR THE LAST TIME IN

$100,000,000,000,000 BILLS

ZIMBABWE

ANGOLA 1995 GERMANY 1923 POLAND 1923, 1992

ARGENTINA 1991 GREECE 1944 REPUBLIKA SRPSKA 1993

AUSTRIA 1922 HUNGARY 1924, 1946 ROMANIA 2005

BELARUS 2002 ISRAEL 1984 SOVIET UNION 1993

BOLIVIA 1984 KRAJINA 1993 TAIWAN 1949

BOSNIA 1993 MEXICO 1982 UKRAINE 1995

BRAZIL 1994 NORTH KOREA 2009 UNITED STATES 1779,

BULGARIA 1996 NICARAGUA 1990 YUGOSLAVIA 1993, 1865

CHINA 1272, 1948 PERU 1990 ZAIRE 1996

DANZIG 1923 PHILIPPINES 1944 ZIMBABWE 2008

PRINTING CURRENCY: COUNTRIES THAT SUFFERED HYPERINFLATION

$1/GALLON $10/GALLON $100,000 $1,000,000

MORTGAGE$100K

SAVERS LOSE - DEBT WINS

WHAT IF YOU COULD PAY OFF YOUR MORTGAGE WITH THE SAME AMOUNT OF

MONEY IT COSTS TO BUY A BANANA!

INFLATION CAN BENEFIT A FIXED DEBT

TREASURY NEEDS MONEY TO COVER THE DEFICIT, SO

IT BORROWS MONEY BY SELLING TREASURY

BONDS.

SO AGAIN, WHY DO WE DO THIS?

TWO MARKETS

BOTH IMPACT ON SOVEREIGNS FUNDAMENTALS

EQUITIES MARKET

STOCKS = OWNERSHIP

COMMON

PREFERRED

PRIVATE OR PUBLIC

DEBT MARKET

BONDS = LOAN

CORPORATE

MUNICIPAL

TREASURY

FOREIGN DEBTTHE US HAS A TRADE DEFICIT

FINANCIAL STATEMENT TRADE DEFICIT

FOREIGN DEBT PRINTING CURRENCY

SOVEREIGN FUNDAMENTALS IMPACT SYSTEMIC RISK

DOES THIS COUNTRY HAVE A STRONG ENOUGH GDP TO COLLECT ENOUGH TAXES THAT IT CAN PAY ITS BILLS?

DEBT TO GDP RATIO

DEBT TO GDP = 234%

DOES THIS COUNTRY HAVE A STRONG ENOUGH GDP TO COLLECT ENOUGH TAXES

THAT IT CAN PAY ITS BILLS?

DEBT TO GDP RATIO EXAMPLE: JAPAN

LONG TERM RESULTS OF JAPANESE QE POLICY

DEBT AS % OF GDP*

JAPAN GREECE UNITED STATES

COMPARISON

*SOURCE=IMF

GREECE

FISCAL POLICY

MONETARY POLICY

GREECEEUROPEAN UNION

CENTRAL BANK

IN THE SHADOW OF SOVEREIGN FUNDAMENTALS

CORPORATE

INCOME

EXPENSES

ASSETS LIABILITIES

PERSONAL

INCOME

EXPENSES

ASSETS LIABILITIES

CORPORATE FINANCIAL STATEMENTS: Q4 2010

TRADING AT $300+ TRADING AT .06

APPLE COMPUTER BLOCKBUSTER VIDEO

$6 B$21 B

$26 BI

$1.12B $1.16B

-$400M

$736MI

VALUATION

HOW DO WE PRICE A COMPANY?

SUPPLY & DEMAND

TECHNICAL ANALYSIS

PRICE = WHAT YOU PAY

HOW DO WE VALUE A COMPANY?

EARNINGS

FUNDAMENTAL ANALYSIS

VALUE = WHAT YOU GET FOR YOUR $$

EARNINGS

COSTS: LEMONS, SUGAR, WATER, TAXES = $20

REVENUE: SALES, TIPS = $50

REVENUE - COSTS = EARNINGS

$50 - $20 = $30

EARNINGS = $30

50 SHARES 50 SHARES

SHARES

100 SHARES

OWNER 1 OWNER 2

EARNINGS PER SHARE

EARNINGS = $30

SHARES = $100

EARNINGS / SHARES = EARNINGS PER SHARE

$30 / 100 = .30

EARNINGS PER SHARE = .30

PRICE EARNINGS RATIO

EARNINGS PER SHARE = .30

HOW MUCH ARE INVESTORS WILLING TO PAY EACH DOLLAR THE BUSINESS IS EARNING?

STOCK PRICE / EPS = PRICE EARNINGS RATIO

$3 / .30 = 10

PRICE EARNINGS RATIO = 10

MARKET CAPITALIZATION

WHAT IS TO TOTAL COMPANY WORTH?

SHARE PRICE = $3

TOTAL NUMBER OF SHARES = 100

$3 X 100 = $300

SHARE PRICE X TOTAL SHARES = MARKET CAP

MARKET CAPITALIZATION = $300 (NANO CAP)

Apple Once Again Bigger Than Exxon Mobil — For Good?

By Mark Gongloff

We’re all looking up to it now.Once more, this time with feeling, Apple is the biggest public company in America, topping Exxon Mobil.

As of last check, everybody’s favorite tech company had a market cap of $342.8 billion, compared with $339.7 billion for the oil behemoth.

WALL STREET JOURNAL

LARGE CAP: >$10 BILLION

MID CAP: $2-$10 BILLION

SMALL CAP: $300M-$10B

LARGE CAP, MID CAP, SMALL CAP

MID CAP: $2-$10 BILLION

LARGE CAP: > $10 BILLION(SUPPOSEDLY WELL ESTABLISHED)

SMALL CAP: $300M-$10B(GROWTH POTENTIAL)

POTENTIAL GROWTHRISK

LARGE CAP, MID CAP, SMALL CAP

COMPANY XYZ

EARNINGS GROWTH

COMPANY ABC

PRICE EARNINGS GROWTH = 1

PRICE, EARNINGS, AND GROWTH (PEG)

PRICE EARNING RATIO = 10

PRICE EARNINGS RATIO/ % GROWTH = PEG

10/10 = 1

% GROWTH = 10

10 P/EGROWTH OF 20%

20 P/EGROWTH OF 10%

10 P/EGROWTH OF 10%

PEG = .5

PEG = 2

PEG = 1

OVER VALUED

AVERAGE VALUE

UNDER VALUED

PEG TRIES TO GIVE A METRIC ON VALUE

LESS THAN .5 COULD MEAN TGTBT

HISTORICAL PERFORMANCE OF THE COMPANY (5 YRS)

COMPARED TO OTHERS IN THE SAME SECTOR OR GROUP

CONSIDER BOTH CURRENT & FUTURE EARNINGS POTENTIAL

PRICE EARNINGS AND GROWTH

BUSINESS

WHAT IS THE DIFFERENCE BETWEEN AN S-CORP,LP

LLC?WHAT FITS BEST?

COMMODITIES

HOW DOES A DOW TO GOLD RATIO

RELATE TO INFLATION?

WHAT IS A FIAT CURRENCY?

STOCKS

WHAT DOES A PEG, P/E

MARKET CAP MEAN & HOW DOES

IT RELATE TO VALUE?

REAL ESTATE

WHAT IS A 1031 EXCHANGE?

HOW MUCH WOULD IT HELP MY ME ON

MY TAXES THIS YEAR?

EACH ASSET CLASS HAS A VOCABULARY

PRACTICE COMPARING THE VALUE SEVERAL STOCKS

MARKET CAP: TOTAL DOLLAR VALUE OF YOUR COMPANY

ENTERPRISE VALUE: VALUE OF COMPANY INCLUDING CASH & DEBT

TRAILING P/E: HOW MUCH YOU ARE PAYING FOR EARNINGS

FORWARD P/E: WHAT WILL YOU LIKELY PAY FOR EARNINGS

PRICE/EARNINGS AND GROWTH.PEG RATIO:

PRICE/SALES: HOW MUCH YOU ARE PAYING FOR REVENUE

PRICE/BOOK: HOW MUCH YOU ARE PAYING FOR THE ASSETS

Income

Expenses

Assets Liabilities

WEALTH BUILDING ACTIVITY

APPLE INC. (AAPL)

GROWTH STOCK(CAPITAL GAIN)

PROCTER & GAMBLE CO. (PG)

DIVIDEND OR INCOME(CASH FLOW)

COMPARISON

WHAT ARE YOU GOALS?

CAPITAL GAIN(FLIP THE HOUSE FOR PROFIT)

CASH FLOW(RENT THE HOUSE FOR INCOME)

HEDGE(BUY INSURANCE FOR PROTECTION)

BEFORE YOU INVEST

CAPITAL GAIN(FLIP THE HOUSE FOR PROFIT)

NET WORTH

CASH FLOW(RENT THE HOUSE FOR INCOME)

CASH FLOW

INSURANCE

HEDGE(BUY INSURANCE FOR PROTECTION)

PROTECT ASSETS

CAPITAL GAIN(BUY LOW SELL HIGH)

AMCE CO.STOCK

100 SHARES NET WORTH

NET WORTH

DIVIDEND

CASH FLOWCOLLECT A DIVIDEND FOR INCOME

CASH FLOW

AMCE CO.STOCK

100 SHARES

CASH FLOW

INSURANCE

HEDGE(BUY A OPTION TO HEDGE RISK)

AMCE CO.PUT OPTION

100 SHARES

PROTECT ASSETS

USING TECHNOLOGY

USE SOFTWARE TO SEARCH

ORGANIZE AND SORT

FILTERS AND SCANS

EXPERIAN, TRANSUNION

STANDARD AND POOR’SMOODY’S

PERSONAL CORPORATE SOVEREIGN

DEBT CRITICAL TO FUNDAMENTALS

DEBT IS AN OBLIGATION CREDIT IS POWER

POWER IS REDUCED BY ABUSE

DEBT AND CREDIT

ABUSING CREDIT POWER

WISE USE OF CREDIT TO PROSPER

TO APPROACHES TO CONTROLLING POWER

REMOVE THE POWER FROM THE PEOPLE TO PREVENT IMPROPER USE

INCREASE THE POWER AND EDUCATE PEOPLE ON ITS PROPER USE

ORGANIZE YOUR PERSONAL FINANCIAL STATEMENT

PAYMENTS

DEFICIT= - NET

MORTGAGE

ACTIVE INCOME

BAD CREDIT / NO CREDIT

SURPLUS= + NET

PASSIVE INCOME

EXCELLENT CREDIT / HIGH LIMITS

STOCKSCOMMODITIESREAL ESTATE

BUSINESS

IMPROVING PERSONAL FUNDAMENTALS

GET A BETTER JOB OR GET A SECOND JOB

SCHOOL # 1 : GET A JOB”

PAYMENTS

DEFICIT= - NET

MORTGAGE

ACTIVE INCOME

CUT EXPENSES LOWER YOU LIFESTYLE

SCHOOL # 2 : ACT YOUR WAGE”

IMPROVING PERSONAL FUNDAMENTALSJOB

PAYMENTS

DEFICIT= - NET

MORTGAGE

ACTIVE INCOME

IMPROVING PERSONAL FUNDAMENTALS

GET EDUCATEDBUILD BUYING POWER

& USE IT TO BUY ASSETS

SCHOOL # 3 : INCREASE EDUCATION, CREDIT & ASSETS”

SURPLUS= + NET

PASSIVE INCOME

EXCELLENT CREDIT / HIGH LIMITS

STOCKSCOMMODITIESREAL ESTATE

BUSINESS

YOU HAVE JUST COMPLETED

BASIC FUNDAMENTAL

ANALYSIS

CONGRATULATIONS!

ASIC FUNDAMENTAL ANALYSIS - Amazon S3 · - you will understand valuation (find good deals and buy smart) - you will analyze current stocks and practice - you will you use your computer

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